U.S. Chamber Comments on CFPB Proposal on Earned Wage Products

To Whom It May Concern:

The U.S. Chamber of Commerce Center for Capital Markets Competitiveness ("CCMC") appreciates the opportunity to submit comments to the Consumer Financial Protection Bureau ("CFPB") regarding its Proposed Interpretive Rule on Truth in Lending (Regulation Z); Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work (the "Proposed Interpretive Rule" or "PRI").The CFPB is proposing to claw back its 2020 Advisory Opinion on EWA ("2020 EWA AO") and to replace it with the PRI that would apply certain provisions of Regulation Z and the Truth in Lending Act ("TILA") to earned wage access ("EWA") products.

EWA products have benefitted consumers and employers. EWA providers enable employees to request a certain amount of their accrued wages prior to their payday, and the funds are later recouped through payroll deductions or bank account debits. As noted by the PRI, EWA products can address financial challenges consumers may face before receiving their regular paycheck (e.g., biweekly). Importantly, and different from other products intended to provide liquidity to consumers, access to liquidity from EWA is contingent on wages already accrued, but not yet in the possession, of a consumer. EWA products offer consumer-friendly terms and are a vital alternative to payday lending products. EWA products are also an important benefit that companies can offer to their employees. Numerous major employers have adopted EWA programs as a low-cost mechanism to assist their employees. The popularity of EWA is supported by market research,[1][2] and is a valuable tool for employers to attract and retain talent. Here, the PRI presents a substantial increase in regulatory burden that could threaten the available of new EWA products in the market and drive up the cost to provide EWA products, harming consumers instead of helping them.

CCMC requests additional regulatory transparency and stability for EWA products to clarify applicable consumer protection requirements, which in turn would promote consistency in those protections across the market. The CFPB should ensure these clarifications are designed to address the specific consumer harms it has observed in the marketplace, rather than making sweeping changes that could disrupt access to EWA products. The CFPB states it is proposing the Interpretive Rule to "help market participants determine when certain existing requirements under Federal law are triggered." The CFPB should have issued a notice of proposed rulemaking, subject to notice and comment, if it is interested in providing regulatory clarity and stability. However, by relying on an interpretive rule, the CFPB invites more questions than it answers. Notably, the PRI's view of what constitutes "credit" is much broader than what is provided for under TILA, and vague explanations for why "tips" and "expedited funds delivery fees" are deemed a "finance charge" raise an alarming signal that the CFPB may believe other optional or convenience fees, not offered as part of an EWA product, must be disclosed subject to TILA and Regulation Z.

We accordingly ask the CFPB to consider the following points:

I. The CFPB should withdraw the Interpretive Rule and instead issue a Notice of Proposed Rulemaking subject to proper notice and comment.

II. The CFPB should further clarify its interpretation of "credit" and "finance charge" under TILA and Regulation Z.

III. The CFPB's effective date must comply with Section 105(d) of the Truth in Lending Act.

Read the full letter here.

[1] 89% are willing to work a longer period of time for an employer who offers EWA. 79% would be willing to switch to an employer who offers EWA. Visa Insights 2019: Earned Wage Access, The Impact on employee engagement, health and financial wellness, available at https://usa.visa.com/dam/VCOM/global/run-your-business/documents/visa-earned-wage-access-insights-report.pdf

[2] According to a study from ADP, 96% of employers offering EWA state it helps them attract talent, and 93% state it helps them retain talent. https://www.adp.com/-/media/adp/resourcehub/pdf/adp_ewa_study_whitepaper.pdf

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